Nvidia Raises $25B in Bond Sale, SpaceX Leapfrogs Amazon in Market Cap

**Zaid Admani** (0:00)
Public.com presents The Rundown, your daily market update in 10 minutes. My name is Zaid Admani, and today is Tuesday, June 16th. In today's episode, we'll explain why Nvidia is borrowing $25 billion. We'll also get into why SpaceX is buying the AI coding company Cursor for $60 billion. Then stick around to the end of the show to find out the surprisingly small economic impact of the World Cup. We got a great show for you today.
Let's go.
The market was off to a hot start on Monday. The S&P 500 jumped 1.7%, while the NASDAQ surged 3.1%, as investors celebrated the US Iran peace deal in the expected reopening of the Strait of Hormuz. But you know, what caught my attention was that this wasn't a broad-based rally. In fact, nearly half the stocks in the S&P 500 were in the red on Monday. This rally was mostly carried by tech and AI stocks. The tech sector was the best performing sector, and the SOX semiconductor index jumped over 5%. But then on the flip side, the energy sector was the worst performing, down over 3%, because oil prices fell on the hopes that Hormuz will reopen and the global energy shipment can go back to normal soon. So yesterday's rally was investors rotating out of the war trade and jumping right back into the risk on tech and AI trade, which had been beaten up over the last couple of weeks. And now the market attention will turn over to the Fed. The Fed meeting kicks off today, and one of the concerns hanging over the market has been the war driven inflation and surge in energy prices would force the Fed to raise interest rates at some point this year. In fact, the market is still concerned about that. According to the CME Fed watch tool, the odds of a rate hike this year are still above 50% despite oil prices starting to fall. So hopefully we'll get some more information this week on what the Fed is thinking. The Fed meeting wraps up tomorrow. Now the market isn't expecting the Fed to change interest rates at this meeting, but investors will be paying close attention to what new Fed chair Kevin Warsh has to say in his press conference. And he might not say a lot. The Wall Street Journal had a report this week saying that Kevin Warsh thinks the Fed talks too much. Kevin Warsh wants fewer speeches from Fed officials, fewer mixed signals and maybe even less emphasis on the dot plot. So moving forward, we could see a lot less info come out of the Fed and I don't know if the markets will like that. We're going to be staying on top of that. So make sure you guys are subscribed to the podcast and tuning in every day to stay in the loop.
Let's run through some headlines. Starting with Nvidia. Nvidia just raised $25 billion by selling bonds and they joined the other big tech companies borrowing a ton of money right now. Now, here's a quick explainer on how this works. When a company does a bond sale like Nvidia just did, they are borrowing money from investors. So investors give Nvidia cash today, and then Nvidia agrees to pay these investors interest over time, and then pay back the original amount when the bond matures. In this case, Nvidia sold bonds with different payback timelines ranging from two years all the way out to 30 years. And apparently investors really wanted in on this bond sale. Bloomberg reported that Nvidia originally planned to raise around $20 billion, but demand was so strong that they bumped it up to $25 billion. Now, here's the part that might seem confusing. Why would a company like Nvidia need to borrow money? I mean, Nvidia's business is printing money right now. They generated over $49 billion in free cash flow in the last quarter alone. Well, Nvidia isn't borrowing money because they need the cash. They're doing it because it's a financially savvy move. A lot of this new money will be going towards refinancing their old debt likely at better interest rates. Plus, when you have a double A credit rating like Nvidia, you can borrow at extremely low interest rates these days. So instead of using their own cash, Nvidia is borrowing cheap money, and they're keeping their cash for things like investing in R&D or share buybacks and a massive dividend increase to return money to shareholders. And that's what makes Nvidia's situation different from the other big tech companies that are also raising money right now. Like for example, Google and Amazon have each raised over $50 billion in debt over the last few months. But the reason these companies are borrowing money is because they're spending more on AI infrastructure than they generate in free cash flow from their main business. So they essentially need to borrow money to build out all the AI infrastructure. Nvidia doesn't have that problem. They're actually the ones selling the chips to all these big tech companies. Big picture though, I'm definitely keeping my eye on all the borrowing from these big tech companies. We even did a deep dive about why Google did an $85 billion stock sale and what it means for the AI trade. So if you missed that episode, go check that out. We'll put a link in the description.